Children are now Worth a Little more Money

There’s a great episode of the West Wing where the government finds itself with extra cash. A democratic aide, confused as to why she isn’t getting a tax refund, complains to her boss who responds “you wouldn’t spend it right”. I’ll leave the punchline to youtube.

Israel is in a similar situation. In the first three months of 2017, the state collected 1.6 billion NIS more than the budget expected due to high levels of revenue. The accelerated collection should continue for the rest of the year.

In response to the surplus (along with a crippling need to not get crushed in the next elections), Finance Minister Moshe Kahlon proposed a number of tax breaks for working families one of which just passed in the Knesset. The law increases tax credits for new(ish) parents based on the chart found below.

Some argue that Israel should spend the money on underfunded priorities such as education or its infrastructure as it already maintains low levels of government spending and revenue. However, the tax breaks can also lead to more private spending and therefore more tax revenue and then everyone wins. They may also allow some parents to continue feeding themselves in addition to their kids, so that’s a plus as well.

Whether you think this is a good idea or not largely hinges on your ideology, but it’s worth noting that the Bank of Israel is generally supporting the changes as a way to fix structural problems.

The bill passed unanimously. The Tax breaks will be in effect retroactively from Jan. 1 2017 until Dec. 31 2018